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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

WEBXCHANGE INC.,

Plaintiff,

v. C.A. No. 08-132-JJF

DELL INC.,

Defendant.

Lawrence B. Goodwin, Esquire; Peter J. Toren, Esquire; Charlotte


Pontillo, Esquire; Stefan R. Stoyanov, Esquire; and Eric J.
Stieglitz, Esquire of KASOWITZ, BENSON, TORRES & FRIEDMAN LLP,
New York, New York.
Jack B. Blumenfeld, Esquire and Julia Heaney, Esquire of MORRIS,
NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware.

Attorneys for Plaintiff.

Christopher V. Ryan, Esquire; Efren Garcia, Esquire; and Avelyn


M. Ross, Esquire of VINSON & ELKINS L.L.P., Austin, Texas.
Richard L. Horowitz, Esquire; David E. Moore, Esquire; and D. Fon
Muttamara-Walker, Esquire of POTTER ANDERSON & CORROON, LLP,
Wilmington, Delaware.

Attorneys for Defendant Dell. Inc.

MEMORANDUM OPINION

January ~ , 2010
Wilmington, Delaware
Farna~~~~
Presently before the Court is Defendant Dell Inc.'s Motion

For Leave To Amend Its Answer (0.1. 130). For the reasons

discussed, Defendant's Motion will be granted.

I . Background

This is a patent infringement action brought by Plaintiff

WebXchange Inc. ("Plaintiff") against Defendant Dell Inc.

("Defendant") alleging infringement of U.S. Patent No. 5,778,178

(the "'178 patent"), U.S. Patent No. 6,212,556 (the "'556

patent"), and U.S. Patent No. 7,340,506 (the "'506 patent")

(collectively, the "patents-in-suit").

On January 23, 2009, the Court issued a Scheduling Order

(0.1. 76) directing the parties to file amendments to pleadings

by January 10, 2009, and calling for document production,

contention interrogatories, and identification of fact witnesses

to be completed by February 27, 2009. On January 13, 2009, the

Court granted Defendant leave to file its First Amended Answer.

(0.1. 74.) On December 30, 2009, the Court denied Defendant's

Motion To Bifurcate, And For Early Trial On, The Issue Of

Inequitable Conduct, by which Defendant sought to have the

inequitable conduct defense tried prior to issues of infringement

and invalidity. (0.1. 156.) A Markman hearing has not yet been

held. Defendant filed the present Motion For Leave To Amend Its

Answer ("Motion To Amend") on May 27, 2009.


II. Parties' Contentions

By its Motion To Amend, Defendant seeks to file a Second

Amended Answer And Counterclaims To WebXchange Inc.'s Original

Complaint For Patent Infringement ("Second Amended Answer") in

order to supplement its affirmative defense and counterclaim of

unenforceability of the patents-in-suit due to inequitable

conduct. (D.I. 131, at 2.) Defendant contends that its Motion

To Amend is proper under Rule 15(a) because it was sought without

undue delay and because Plaintiff will not suffer any prejudice

from the proposed amendments. (Id. at 5-6.) Specifically,

Defendant asserts that there was no delay because the following

evidence, which was unavailable before the pleading deadline,

forms the basis of the proposed Second Amended Answer:

information disclosure statements filed by Plaintiff with the

United States Patent and Trademark Office ("PTO") on or around

May 5, 2009, and evidence produced on February 27, 2009

concerning an author of a prior art reference and one of

Plaintiff's employees. (Id. at 7.) According to Defendant,

Plaintiff will not be prejudiced by the Second Amended Answer

because it merely serves to flush out the existing inequitable

conduct defense. (Id. at 5.) Defendant further contends that

"good cause" exists under Rule 16(b) because Defendant is

supplementing the previously asserted inequitable conduct defense

with evidence that was unavailable before the pleading deadline.

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(ld. at 8).

Plaintiff opposes Defendant's Motion To Amend, arguing that


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Defendant has not established good cause to amend. Plaintiff

generally contends that Defendant has failed to explain why it

could not have timely amended because, according to Plaintiffs,

the information on which the proposed amendments are based was

actually in Defendant's possession by August 2008. (D.l, 134, at

6.) Plaintiff additionally contests amendment on the grounds

that Paragraph 49 is futile (id. at 8-10), and that Plaintiff

will be unduly prejudiced because the Second Amended Answer adds

new defenses after the deadline for identifying fact witnesses,

and for serving document requests and contention interrogatories

has passed (id. at 7).

III. Legal Standard

"After amending once or after an answer has been filed, the

plaintiff may amend only with leave of the court or the written

consent of the opposing party." Shane v. Fauver, 213 F.3d 113,

115 (3d Cir. 2000) (citing Fed. R. Civ. P. 15 (a)). The district

court has discretion in granting a motion to amend, Foman v.

Davis, 371 U.S. 178, 182 (1962), and "the court should freely

IPlaintiff only opposes the proposed amendments which relate


to Defendant's inequitable conduct defense. Namely, Plaintiff
opposes Paragraphs 13, 16, 35, 41-44, 47-51 of the Second Amended
Answer. The Court notes that Paragraph 35 was previously
asserted in the First Amended Answer (D.l. 75 ~ 31), and no
modifications have been made to it in the Second Amended Answer.

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give leave when justice so requires." Fed. R. Civ. P. 15(a) (2).

The Third Circuit has adopted a liberal policy favoring the

amendment of pleadings to ensure that claims are decided on the

merits rather than on technicalities. Dole v. Arco Chern. Co.,

921 F.2d 484, 487 (3d Cir. 1990). Amendment should ordinarily be

permitted absent a showing of "undue delay, bad faith or dilatory

motive on the part of the movant, repeated failure to cure

deficiencies by amendment previously allowed, undue prejudice to

the opposing party by virtue of the allowance of the amendment,

futility of the amendment, etc." Foman, 371 u.s. at 182.

If a party moves for leave to amend the pleadings after a

deadline imposed by a Scheduling Order, Rule 16 of the Federal

Rules of Civil Procedure is implicated. Pursuant to Rule 16(b),

"a schedule may be modified only for good cause and with the

judge's consent." Fed. R. Civ. P. 16(b) (4). After a pleading

deadline has passed, the Third Circuit requires a showing of good

cause in order to amend. See E. Minerals & Chems. Co. v. Mahan,

225 F.3d 330, 340 (3d Cir. 2000) (affirming district court's

denial of motion for leave to amend because no showing of good

cause to modify scheduling order was made) ; see also Dimensional

Commc'ns, Inc. v. 02 Optics, Ltd., 148 Fed. Appx. 82, 85 (3d Cir.

2005) (citing E. Minerals to disagree with assertion that Third

Circuit had not adopted the good cause requirement when ruling on

motions to amend a pleading after a scheduling order deadline has

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passed). "Good cause" exists when the Schedule cannot reasonably

be met despite the diligence of the party seeking the extension.

Fed. R. Civ. P. 16(b) (4) Advisory Committee's Notes(1983

amendments). "In contrast to Rule 15(a), the good cause standard

under Rule 16(b) hinges on diligence of the movant, and not on

prejudice to the non-moving party." Roquette Freres v. SPI

Pharma, Inc., C.A. No. 06-540-GMS, 2009 WL 1444835, at *4 (D.

Del. May 21, 2009).

IV. Discussion

A. Rule 16(b)

The Court concludes that Defendant has demonstrated good

cause to file its Second Amended Answer, and that the amendments

could not have been made before the January 10, 2009 pleading

deadline, despite Defendant's diligence. Paragraphs 13 and 16 of

the Second Amended Answer relate to inequitable conduct

allegations based on Dr. Arunachalam's purported failure to

disclose certain Internet Standards as prior art references

during prosecution of the patents-in-suit. Plaintiff contends

these proposed amendments are based on information obtained from

the patents-in-suit and their prosecution histories, not on

documents that Plaintiff filed with the PTO in February and March

2009. Upon review of the February 13, 2009 and March 9, 2009

disclosure statements filed by Plaintiffs with the PTO (0.1. 131,

Exs. 1, 2), however, the Court is satisfied that the proposed

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amendments are responsive to Plaintiff's representations in these

disclosures. Accordingly, good cause exists with regard to

Paragraphs 13 and 16.

Good cause similarly exists with regard to Paragraphs 41-44,

and 47-51 of the Second Amended Answer, which relate to

inequitable conduct allegations based on Dr. Arunachalam's

purported failure to disclose CORBA references to the PTO during

prosecution of the patents-in-suit. Plaintiff contends that the

business plans it produced in August 2008 contained references to

a book written by Bob Orfali and Dan Harkey (the "Orfali book")

and to CORBA generally, and thus, that Defendant was aware of the

Orfali book months before the pleading deadline. (0.1. 134, at

8.) Upon review of Plaintiff's business plans (0.1. 131, Ex. 6;

0.1. 135, Exs. A, B), the Court finds they do not contain

sufficient information upon which Defendant could have pleaded

inequitable conduct based on Dr. Arunachalam's knowledge of the

Orfali book and her failure to disclose it as prior art with

respect to the '556 patent. See Enzo Life Sci., Inc. v. Digene

Corp., 270 F. Supp. 2d 484, 487 (D. Del. 2003) (stating that Rule

9(b) requires that claims of inequitable conduct in patent cases

be pled with particularity). Rather, the Court is persuaded that

Defendant "did not possess evidence that would link the book to

development of [the patents-in-suit]" until Plaintiff's February

27, 2009 document production. (0.1. 138, at 3.)

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B. Rule 15(a)

Turning to Rule 15(a), the Court first concludes that the

proposed amendment in Paragraph 49 2 is not futile. Amendment of

a complaint is futile if it fails to state a claim upon which

relief can be granted. In re Burlington Coat Factory Sec.

Litig., 114 F.3d 1410, 1434 (3d. Cir. 1997) (citing Glassman v.

Computervision Corp., 90 F.3d 617, 623 (1st Cir. 1996)). In

determining the futility of a proposed amendment, the Court must

apply the same standard of legal sufficiency as under Rule

12(b) (6) of the Federal Rules of Civil Procedure. Id. If the

proposed amendment "is frivolous or advances a claim or defense

that is legally insufficient on its face, the court may deny

leave to amend." Harrison Beverage Co. v. Dribeck Imp., Inc.,

133 F.R.D. 463, 468-69 (D.N.J. 1990) (citing 6 Charles Alan

Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and

Procedure § 1487 (2nd ed. 1990)).

Plaintiff contends that Paragraph 49 is futile because an

engineer's knowledge cannot be imputed to the inventor for

purposes of 37 C.F.R § 1.56's disclosure requirements. (D. I.

134, at 9.) However, Plaintiff's reliance on Matshushita Elec.

2 Paragraph 49 alleges that "At least one WebXchange


engineer took a course given by at least one of the authors of
the 1998 Orfali book. On information and belief, the same
engineer was at least partially responsible for implementing
functionality both claimed in the 556 patent and taught by the
Orfali book." (0.1. 130, Ex. A , 49.)

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Indus. Co. v. Cinram Int'l, Inc., 299 F. Supp. 2d 348 (D. Del.

2004), is misplaced. Matshushita involved a plaintiff's motion

for summary judgment on a defendant's inequitable conduct

defense. Id. The motion was granted, and no inequitable conduct

found, because the inventor instructed engineers to search for

patents relevant to his research, but "the court [found] no

evidence of record to show either that [the inventor] knew of

[the relevant patents] or that he intentionally withheld them

from the PTO." Id. at 360-61. Unlike in Matshusita, factual

determinations about the extent of Dr. Arunachalam's knowledge of

the Orfali book and whether or not the Orfali book was

intentionally withheld from the PTO are not appropriate at this

stage of the litigation. Moreover, the Second Amended Answer

does not merely rely on Paragraph 49 to allege Dr. Arunachalam's

knowledge of the Orfali book. Rather, Defendant pleads that Dr.

Arunachalam "possessed a copy of or knew of the 1998 Orfali

book," and "knew that the 1998 Orfali book described the features

of CORBA." (0.1. 130 Ex. A ~~ 42, 43.) Accordingly, the Court

concludes that inequitable conduct claim is not futile because

the factual allegations of inequitable conduct are enough to

raise a right to relief above the speculative level, and the

claim is plausible on its face.

Further, the Court concludes that Plaintiffs will not be

unduly prejudiced by the Second Amended Answer. In order to

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prove undue prejudice, the non-movant "must show that it was

unfairly disadvantaged or deprived of the opportunity to present

facts or evidence which it would have offered. . had the

amendments been timely." Bechtel v. Robinson, 886 F.2d 644, 652

(3d Cir. 1989) (citing Heyl & Patterson Int'l, Inc. v. F.D. Rich

Hous. of V.I., Inc., 663 F.2d 419, 426 (3d Cir. 1981)). Contrary

to Plaintiff's assertion that the Second Amended Answer contains

"new" inequitable conduct defenses, the Court concludes that the

amendments pertain to two inequitable conduct theories previously

alleged in the First Amended Answer: Dr. Arunachalam's purported

failure to disclose certain Internet Standards to the PTO during

prosecution, and Dr. Arunachalam's purported failure to disclose

CORBA references to the PTO during prosecution. Finally, in

rejecting Plaintiff's contentions of undue prejudice and granting

Defendant's Motion To Amend, the Court is mindful of the

procedural posture of this case. No Markman hearing has been

conducted, no trial date has been set, and the close of both fact

and expert discovery are tied to the issuance of a claim

construction Order. (See D.I. 76.)

Accordingly, the Court concludes that Defendant should be

granted leave to file its Second Amended Answer.

v. Conclusion

For the reasons discussed, Defendant's Motion For Leave To

Amend Its Answer will be granted.

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An appropriate Order will be entered.

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

WEBXCHANGE INC.,

Plaintiff,

v. C.A. No. 08-132-JJF

DELL INC.,

Defendant.

ORDER

At Wilmington, this ~day of January 2010, for the reasons

set forth in the Memorandum Opinion issued this date;

NOW THEREFORE, IT IS HEREBY ORDERED that:

1. Defendant Dell Inc.'s Motion For Leave To Amend Its Answer

(0.1. 130) is GRANTED.

2. Defendant's Second Amended Answer And Counterclaims To

WebXchange Inc.'s Original Complaint For Patent Infringement

attached to the aforementioned Motion (0.1. 130, Ex. A) is

deemed filed.